Judge declines to disqualify Boston law firm in trademark suit

BOSTON, MA — Law firm DLA Piper should not be disqualified from representing the defendant in a trademark infringement suit even though one of its attorneys had represented the plaintiff in the past, a federal judge ruled after finding that the January retirement of the attorney removed any remaining risk of a conflict of interest.

The plaintiff, California Association of Realtors, argued that disqualification was required because DLA Piper had represented it in the past and had not taken steps to close its “general advice” account until after the law firm became aware of the potential conflict with the defendant, website operator PDFfiller.

But U.S. District Court Judge Indira Talwani concluded that the retirement of Jeffrey Shohet, the lawyer who handled the plaintiff’s account, in addition to ethical screens put in place to protect the plaintiff’s confidential information, warranted permitting DLA Piper’s continued representation of an opposing party in a matter unrelated to the firm’s prior work for the former client.

The judge wrote that “no attorney remaining at DLA Piper has confidential information material to the matter. For these reasons, as to future litigation, Shohet’s retirement removes the bar against DLA Piper attorneys’ representation here.”

Conflict risk

DLA Piper attorney Bruce E. Falby of Boston argued against disqualification on behalf of the defendant. He declined to comment.

Daniel J. Pasquarello represented the plaintiff on its motion to disqualify. The Boston attorney did not respond to a request for comment prior to deadline.

But the professional ethics experts who spoke with Lawyers Weekly agreed with Talwani’s ruling.

“DLA Piper did things correctly,” said Boston attorney Thomas E. Peisch. “It looked into the conflict situation, erected the appropriate [ethical] screens, and took a principled stand in the face of the disqualification motion.”

Peisch added that it would have been a “close question” whether, absent the retirement of Shohet, the existence of the plaintiff’s open general advice account would have necessitated DLA Piper’s disqualification. In that sense, he said, the case points out the “ethical danger” posed by leaving general client accounts open after business has trailed off.

Thomas W. Kirchofer said it is important for lawyers to seriously think about whether a general advice account like the one used by DLA Piper makes sense for a given client.

“That sort of relationship makes sense if the client and the lawyer are dealing together with some great frequency,” the Boston attorney said. “But if the phone’s not ringing too often, it might make better sense for the lawyer and the client to go back to a relationship where they open a new matter for each individual question.”

James S. Bolan of Newton also agreed with Talwani’s conclusion that disqualification of DLA Piper was not required. He emphasized the facts that the attorney responsible for the plaintiff’s account was no longer with the firm and that no work had been done for the client in two years.

“Not only does this make [the plaintiff] a former client under the rules, but because of the [ethical] screening there’s no reasonable likelihood that the current lawyers involved in the matter would have access to information that could be used to the detriment of the former client,” Bolan said.

The plaintiff may have made a tactical error in allowing the case to move forward with alternative dispute resolution before the disqualification issue was resolved, he added.

“Laches and estoppel are concepts that apply in disqualification cases,” Bolan said. “If you wait too long and don’t jump on it right away, any judge is going to look at that and think maybe it’s really not that big a deal to you.”

Longtime client

Shohet is a San Diego attorney who began representing the plaintiff in 1999 when he worked at a predecessor firm of DLA Piper, which formed in 2005. In addition to retainer agreements for specific litigation, in 2003 the firm opened an account “to provide general advice from time to time as requested” by the plaintiff, with Shohet designated as the primary attorney.

Shohet and his colleagues initially represented the plaintiff and its individual directors in several antitrust actions, the last of which had concluded by 2010. The plaintiff in 2007 also retained DLA Piper to represent it in a class action alleging violation of California unfair competition laws. That lawsuit was likewise concluded by 2010.

Meanwhile, Shohet continued to provide counsel to the plaintiff under the terms of the general advice account.

However, the number of hours billed to that account steadily declined from 2010 to 2015. For example, Shohet billed only five hours between 2013 and 2015. One other attorney at the firm billed two hours in 2015, and DLA Piper has not done any work for the plaintiff since 2015.

In June 2016, the plaintiff filed a trademark and copyright infringement suit in U.S. District Court in Boston against defendant PDFfiller, a website operator based in Brighton. The defendant sought DLA Piper’s representation in the lawsuit based on a company executive’s longstanding relationship with Michael G. Strapp, an attorney who had recently joined the firm’s Boston office.

A conflict search by DLA Piper flagged the plaintiff’s general advice account as an open matter. The head of DLA Piper’s intellectual property group contacted Shohet to ask whether the plaintiff’s account could be closed due to inactivity in the previous 10 months. Shohet agreed that the account could be closed.

DLA Piper subsequently concluded that the plaintiff could be treated as a former client and that the firm’s representation of the defendant would not pose a conflict of interest.

After Strapp entered an appearance, the parties agreed to refer the case to a magistrate judge for ADR. Despite agreeing to ADR, several days after the referral, plaintiff’s counsel sent Strapp a letter asserting that DLA Piper’s representation in the case posed a conflict of interest.

The firm responded by immediately erecting an ethical screen that barred attorneys representing the defendant from accessing information relating to DLA Piper’s prior representation of the plaintiff. The plaintiff nonetheless filed a motion to disqualify DLA Piper.

Meanwhile, the parties were making progress in ADR and jointly requested a stay of certain deadlines concerning the motion to disqualify. Shohet retired from DLA Piper on Jan. 1 while the stay was still in place.

The magistrate judge subsequently reported that attempts by the parties to settle the case through ADR had failed, causing the plaintiff to request a stay of all proceedings pending the resolution of the motion to disqualify.

Ethical screens

In addressing the merits of the plaintiff’s motion, Talwani used as a starting point Rule 1.7(a) of the Massachusetts Rules of Professional Conduct, which prohibits attorneys from representing a client if “the representation of one client will be directly adverse to another client.”

Consequently, she wrote, an attorney “is precluded from ‘act[ing] as an advocate in one matter against a person the lawyer represents in some other matter, even when the matters are wholly unrelated.’”

The judge observed that the case raised the question of whether — in the absence of any ongoing work — the existence of the general advice account barred DLA Piper from representing a client adverse to the plaintiff.

The judge said that the agreement could be viewed as merely a “convenience” for both parties in the event that the plaintiff had further legal questions. In that light, the existence of such an agreement merely obviated the need for establishing new billing terms and executing new retainer agreements every time a new legal matter arose.

However, Talwani pointed out that an agreement to provide legal advice as requested could also be viewed as making the plaintiff an ongoing client, triggering the rule of imputed disqualification notwithstanding DLA Piper’s internal steps to erect ethical screens.

Talwani concluded that she did not need to resolve that issue because of Shohet’s retirement. The judge observed that Mass. R. Prof. Conduct 1.10(b) provides that when a lawyer has terminated an association with a firm, “the former firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer and not currently represented by the former firm.”

The rule provides two exceptions, the first prohibiting representation in a matter that is “the same or substantially related to that in which the formerly associated lawyer represented the client.”The second prohibits representation when a lawyer remaining in the former firm has confidential information that is “material to the matter.”

The judge found neither exception applied in the matter before her.

“Here, it does not appear that the matter is the same or substantially related to the advice provided or the litigation in which Shohet previously represented the client,” the judge wrote. “The firm has constructed an ethical screen to bar attorneys outside the [firm’s] Office of General Counsel from accessing files related to its former representation of [the plaintiff].”

Talwani acknowledged that, typically, Shohet’s departure from the firm would not be determinative in the disqualification analysis because his retirement occurred after the litigation had commenced.

However, Talwani found it significant that the parties agreed to proceed with ADR before she had a chance to rule on the motion to disqualify.

The plaintiff’s “actions in proceeding to ADR and agreeing to stay proceedings relating to the motion to disqualify support the conclusion that there are no true issues of attorney-client loyalties at issue here,” she wrote.